Question

The management of an amusement park is considering purchasing a new ride for $32,000 that would...

The management of an amusement park is considering purchasing a new ride for $32,000 that would have a useful life of 8 years and a salvage value of $4,000. The ride would require annual operating costs of $24,000 throughout its useful life. The company's discount rate is 10%. Management is unsure about how much additional ticket revenue the new ride would generate-particularly because customers pay a flat fee when they enter the park that entitles them to unlimited rides. Hopefully, the presence of the ride would attract new customers. (Ignore income taxes.)


Required:

How much additional revenue would the ride have to generate per year to make it an attractive investment? (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

The management of an amusement park is considering purchasing a new ride for $32,000 that would have a useful life of 8 years and a salvage value of $4,000. The ride would require annual operating costs of $24,000 throughout its useful life. The company's discount rate is 10%. Management is unsure about how much additional ticket revenue the new ride would generate-particularly because customers pay a flat fee when they enter the park that entitles them to unlimited rides. Hopefully, the presence of the ride would attract new customers. (Ignore income taxes.)

Required:

How much additional revenue would the ride have to generate per year to make it an attractive investment? (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The management of an amusement park is considering purchasing a new ride for $50,000 that would...
The management of an amusement park is considering purchasing a new ride for $50,000 that would have a useful life of 10 years and a salvage value of $5,000. The ride would require annual operating costs of $33,000 throughout its useful life. The company's discount rate is 8%. Management is unsure about how much additional ticket revenue the new ride would generate-particularly because customers pay a flat fee when they enter the park that entitles them to unlimited rides. Hopefully,...
The management of an amusement park is considering purchasing a new ride for $83,000 that would...
The management of an amusement park is considering purchasing a new ride for $83,000 that would have a useful life of 10 years and a salvage value of $10,300. The ride would require annual operating costs of $33,500 throughout its useful life. The company's discount rate is 9%. Management is unsure about how much additional ticket revenue the new ride would generate-particularly since customers pay a flat fee when they enter the park that entitles them to unlimited rides. Hopefully,...
Two new rides are being compared by a local amusement park in terms of their annual...
Two new rides are being compared by a local amusement park in terms of their annual operating costs. The two rides would generate the same revenue (thus focus on operating costs). The Tummy Tiger ride has fixed costs of $10,000 per year and variable cost of $2.50 per rider. The Head Buzzer has fixed costs of $4000 per year and $4.00 per rider. a) How many riders would there be for both rides to have an equal cost? (Please show...
Two new rides are being compared by a local amusement park in terms of their annual...
Two new rides are being compared by a local amusement park in terms of their annual operating costs. The two rides would generate the same revenue (thus focus on operating costs). The Tummy Tiger ride has fixed costs of $10,000 per year and variable cost of $2.50 per rider. The Head Buzzer has fixed costs of $4000 per year and $4.00 per rider. 1) How many riders would there be for both rides to have an equal cost? The answer...
Starcups Coffee Company is launching a new sustainability initiative that would reward customers for purchasing a...
Starcups Coffee Company is launching a new sustainability initiative that would reward customers for purchasing a reusable cup. During the cup promotion, customers would pay an extra $1.00 for the reusable cup and would receive a 25% discount each time they return with the cup to buy a cup of coffee. Each week Starcups serves 52,000 customers who purchase an average of 2.00 cups of coffee per week (104,000 cups total). Starcups’s contribution margin income statement for a typical week...
Swifty Corporation is considering the purchase of a new bottling machine. The machine would cost $220,266...
Swifty Corporation is considering the purchase of a new bottling machine. The machine would cost $220,266 and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash flows of $37,800. Management also believes that the new bottling machine will save the company money because it is expected to be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 9%. (a)-...
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of...
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare comprehensive budgets for the upcoming second quarter in order to show management the...
Gilroy’s Casting Company, which has historically specialized in aluminum casting is considering adding a new bronze...
Gilroy’s Casting Company, which has historically specialized in aluminum casting is considering adding a new bronze casting line to its production facility. Over the past several years the artistic community in Park City and along the Wasatch front has significantly increased and the company has received an increasing number of requests to do bronze castings. The casting line would be set up in unused space in Gilroy’s main plant. The equipment would cost approximately $200,000, plus another $10,000 for shipping...
HASBRO DEVELOPS A GLOBAL SYSTEMS STRATEGY If you’ve ever played in a sandbox with a Tonka...
HASBRO DEVELOPS A GLOBAL SYSTEMS STRATEGY If you’ve ever played in a sandbox with a Tonka dump truck, accessorized a My Little Pony, manipulated a Transformer, or engaged in mock combat with a G.I. Joe, you have experienced a piece of the Hasbro Inc. juggernaut. Begun by brothers Henry, Hilal, and Herman Hassenfeld in 1923 as a pencil box and school supplies company, Hasbro transitioned to toys in the 1940s. Acquisitions, including Milton Bradley, Tonka, and Wizards of the Coast...
The Business Case for Agility “The battle is not always to the strongest, nor the race...
The Business Case for Agility “The battle is not always to the strongest, nor the race to the swiftest, but that’s the way to bet ’em!”  —C. Morgan Cofer In This Chapter This chapter discusses the business case for Agility, presenting six benefits for teams and the enterprise. It also describes a financial model that shows why incremental development works. Takeaways Agility is not just about the team. There are product-management, project-management, and technical issues beyond the team’s control. Lean-Agile provides...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT